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/raid1/www/Hosts/bankrupt/TCR_Public/990608.MBX T R O U B L E D C O M P A N Y R E P O R T E R Tuesday, June 8, 1999, Vol. 3, No. 109 Headlines AAMES FINANCIAL: Net Loss For Qtr. Reflects Accounting Method Change AMERICAN RICE: Seeks To Estimate Claims of ERLY at Zero ANCHOR RESOLUTION: Seeks Approval of Purchase and Sale Agreement BONNEVILLE PACIFIC: The Question Being Pondered, To Be Or Not To Be? BOSTON CHICKEN: Amendments To DIP Order COMMERCIAL FINANCIAL: Seeks Approval of Bidding Procedures CROWN PACKAGING: Questions Dual Filing in US and Canada EDISON BROS: Taps Brown & James To Handle Litigation ELECTRO-CATHETER: Order Authorizes Retention of Counsel ERNST HOME CENTER: Approval of Disclosure Statement ERNST HOME CENTER: Disclosure Statement and Plan Summary FIDELITY BANCORP: Loan Originations Way Up, Improved Results FITZGERALDS GAMING: Final Acts Remain In Sale of Nevada Clubs GARDEN BOTANIKA: Continues Liquidations and Closings GARDEN BOTANIKA: Company Says it Will Emerge By or Before 2001 HIGHWAYMASTER: Settlement Agreements Enhance Revenue Figures HOMEPLACE: Court Confirms Plan IONICA PLC: Seeks Approval of Cross Border Protocol LAURA ASHLEY: Shareholders Back Plan LOEWEN GROUP: Prepaid Plans are Safe LOEWEN GROUP: Taps Jones Day as Lead Counsel LONG JOHN SILVER: Interim Order MCA FINANCIAL: Assets Auctioned MEDPARTNERS: Deadline Extended for Agreement ONEITA INDUSTRIES: Seeks Extension Of Time To Assume/Reject Leases PARAGON TRADE: Seeks Eighth Extension of Exclusivity PHILIP SERVICES: To File Prepack in US and Canada PHP HEALTHCARE: Seeks Order Establishing Bidding Procedures PITTSBURGH PENGUINS: Judge Gives "Pep Talk" PROCTER & GAMBLE: Cutting Thousands of Jobs, Closing Offices READING CHINA: Seeks To Pay Severance and Stay Bonuses RENAISSANCE COSMETICS: Files Chapter 11 Bankruptcy RUSSELL CAVE: Committee Objects To Extension SOUTHERN PACIFIC: Renewal of Motion For Examiner STEEL HEDDLE: Net Sales Down 3.8%, Net Loss Vs. Gain Last Year TRANSTEXAS GAS: Seeks Authority To Pay Pre-Petition Royalties UNITED COMPANIES: Seeks Extension of Exclusivity UNITED COMPANIES: Seeks Time To File Financial Statements UNITED HEALTHCARE: Annual Election of Directors Under Consideration VENCOR: Further Interim Arrangements With Ventas WIRELESS ONE: Seeks Order Extending Exclusivity WORLDWIDE DIRECT: Bar Date Set For July 16 ZENITH ELECTRONICS: First Qtr. Losses & April Brought More Problems Meetings, Conferences and Seminars ********* AAMES FINANCIAL: Net Loss For Qtr. Reflects Accounting Method Change -------------------------------------------------------------------- Aames Financial Corp. is a consumer finance company primarily engaged, through its subsidiaries, in the business of originating, purchasing, selling, and servicing home equity mortgage loans secured by single family residences. Upon its formation in 1991, the company acquired Aames Home Loan, a home equity lender founded in 1954. In August 1996, the company acquired One Stop Mortgage, Inc. which originates mortgage loans primarily through a broker network. In March 1998, Aames augmented its retail production by establishing One Stop Retail Direct. Unlike the company's traditional retail network, which uses a centralized marketing approach, Retail Direct uses a decentralized marketing approach at the branch level. The company is in the process of consolidating its loan production channels into one company. Subject to receiving the necessary licenses and regulatory approvals, the retail direct and broker production channels will also operate under the name "Aames Home Loan." Aames' principal market is borrowers whose financing needs are not being met by traditional mortgage lenders for a variety of reasons, including the need for specialized loan products or credit histories that may limit such borrowers' access to credit. The residential mortgage loans originated and purchased by the company, which include fixed and adjustable rate loans, are generally used by borrowers to consolidate indebtedness or to finance other consumer needs rather than to purchase homes. During the three and nine months ended March 31, 1999, Aames originated and purchased $401.7 million and $1.68 billion, respectively, of mortgage loans. Aames underwrites and appraises every loan it originates and generally reviews appraisals and re- underwrites all loans it purchases. The review appraisals are used to substantiate the credit grades assigned to the loans, but generally do not replace the original appraisal for purposes of establishing loan to value ratios. Its commercial loan division ceased operations in January 1999. Aames retains the servicing on the loans it originates or purchases and securitizes. At March 31, 1999, the company serviced 100% of its $4.05 billion servicing portfolio. In the first quarter of 1998 Aames' revenue was $59,538,000 and the company realized a net profit of $2,018,000. During the quarter ended March 31, 1999, the company recorded a net loss of $36.0 million on revenues of $36,814,000. Contributing to the net loss was $15.1 million in pre-tax operating losses and $37.0 million for a one-time charge related to the company's servicing advances which are recorded as accounts receivable on the company's balance sheet. Aames says it has implemented various cost savings plans and expects to realize the benefit from those cost savings in the future. Even with those cost savings, until the company's loan production increases significantly, the company will not be profitable as long as it continues to rely solely on the whole loan market. Aames is evaluating market and other conditions with respect to completing a securitization during the quarter ended June 30, 1999. However, no assurance can be given that market conditions will not change or other events will not occur that would preclude or inhibit the company's attempt to complete a securitization in the June 1999 quarter. In April 1999, Aames entered into a transaction with a loan servicing company pursuant to which the servicing company would sub- service two of the company's securitization trusts and assume the obligation to make future advances on the two pools. The company is in the process of completing negotiations with the servicing company for the sale of outstanding servicing advances related to those two pools. Pursuant to this transaction, the company will receive proceeds of approximately $13.3 million, representing the outstanding advances against those two pools. AMERICAN RICE: Seeks To Estimate Claims of ERLY at Zero ------------------------------------------------------- A hearing will be held on June 14, 1999 at the US Bankruptcy Court in Corpus Christi Texas on the motion of the debtor, American Rice Inc. ("ARI") to have heard on an emergency basis its motion objecting to and seeking to estimate alleged claims of ERLY Industries, Inc. at zero. ERLY alleges a tax reimbursement claim in the amount of $11.3 million. The debtor claims that ARI has over $24 million in claims against ERLY based simply on the ERLY Notes and Intercompany Account. ARI therefore argues that it has legitimate offsets to all ERLY claims. ARI states that the Tax Reimbursement Claim is a contingent indemnity claim that must be disallowed. ERLY has not established any theory of liability or of reimbursement or indemnity against ARI in respect of this claim. ARI also states that ERLY's stock claim is meritless because ERLY has not satisfied the underlying Bondholder claims; and that the Preference Claim is meritless because ARI received no preferences from ERLY. ANCHOR RESOLUTION: Seeks Approval of Purchase and Sale Agreement ---------------------------------------------------------------- The debtors, Anchor Resolution Corp., et al. seek entry of an order approving the purchase and sale agreement between Anchor Liquidating Trust and FWDT Inc., subject to higher or better offers and establishing bidding procedures. A hearing will be held on July 9. 1999 at 11:30 AM before the Honorable Peter J. Walsh, US Bankruptcy Court, Marine Midland Plaza 824 Market Street, 6th Floor, Wilmington, Delaware. Pursuant to the Agreement FWDT is purchasing all of the Anchor Liquidating Trust's right, title and interest in and to a certain 38.75 acres of land with three interlocking buildings containing 358,800 square feet located in Navarro County, Texas. The purchase price is $675,000. The first overbid, if any, must be in cash in an amount not less than $25,000 higher than the purchase price offered by FWDT. Subsequent bids shall be in increments of at least $25,000. BONNEVILLE PACIFIC: The Question Being Pondered, To Be Or Not To Be? -------------------------------------------------------------------- From December 5, 1991 until November 2, 1998, Bonneville Pacific Corp. operated under the jurisdiction of the United States Bankruptcy Court. The facts which follow compare a period during bankruptcy, the first quarter of 1998, to a non-bankruptcy period, the first quarter of 1999. The Company reported net income of $137,000 for the first quarter of 1999 compared to $1,009,000 for the first quarter of 1998. Revenues were $10,864 and $5,434 respectively. Bonneville Pacific previously announced that it had appointed CIBC Oppenheimer as the company's financial advisor. CIBC Oppenheimer has been retained to assist the company in defining strategic and financial alternatives relating to its power generation operations and its oil and natural gas activities. CIBC Oppenheimer has developed a preliminary analysis of the company's operations and potential valuations of the company under a variety of alternative strategies. Strategies being considered by Bonneville Pacific include, but are not necessarily limited to, the continued operations of the company, the sale of some of the assets or operations of the company, or the sale of the entire company. As part of the consideration of alternative strategies, CIBC Oppenheimer has begun a process to solicit bids from interested parties for some or all of the operations of the company. The ultimate strategy adopted by Bonneville Pacific will be at the sole discretion of the Board of Directors after the company and CIBC Oppenheimer have evaluated the results of the bidding process. BOSTON CHICKEN: Amendments To DIP Order --------------------------------------- The Debtors have requested and the agents for the Debtors' secured lenders have agreed to, certain amendments to the DIP Order and the DIP Credit Agreement. In support of their request, the Debtors tell Judge Case that "the proposed amendments are necessary to continue the business operations in a manner that will enable management to sustain its business turnaround plan." The Debtors believe that "the terms of the amendment provide greater flexibility with respect to availability of previously segregated liquidity reserves." The Debtors tell the Court that they do not believe that any of the proposed amendments have an adverse or negative impact on operations or the assets of the estates and that "the Debtors do believe that the proposed amendments are, in fact, in the best interests of the estates and their creditors." The Existing DIP Credit Agreement was amended to reflect the following: Any prepayments made by Borrowers shall be applied as follows: first, to the outstanding principal balance of Revolving Credit Advances until the same shall have been paid in full; and second, to any L/C Obligations, to provide cash collateral therefor, until all such L/C Obligations have been fully cash collateralized. Upon application of any prepayment pursuant to the clause above, The Revolving Loan Commitments shall be permanently reduced in an amount equal to the amount of such prepayment; provided, that with respect to the first $900,000 of such prepayments (or such greater amount, up to a maximum of $1,000,000) that are made after the Second Amendment Closing Date, such reduction of the Revolving Loan Commitments shall be provisional in nature, and shall become permanent to the extent that: (A) When the appraisal of the owned and leased Real Estate of Borrowers that is currently being conducted is completed, Administrative Agent shall charge the fees and expenses thereof, the Appraisal Expense, to the Revolving Loan, it being acknowledged and agreed that the Appraisal Expense is an expense that is reimubursable which shall be paid for with the proceeds of a Revolving Credit Advance. Once Administrative Agent has been billed for the Appraisal Expense, Administrative Agent shall notify Lenders in writing of the amount thereof, and each Lender shall, within one Business Day of such notice, make the amount of such Lender's Pro Rata Share of a Revolving Credit Advance in the amount of the Appraisal Expense available to Administrative Agent in the same day funds by wire transfer to Administrative Agent's account (B) effective upon the funding by Lenders of the amounts necessary to pay for the Appraisal Expense, (1) the Provisional Commitment Reduction shall become a permanent reduction of the Revolving Loan Commitments only to the extent that the amount thereof is in excess of the amount of the Appraisal Expense, and (2) the remaining balance of the Provisional Commitment Reduction, in an amount equal to the Appraisal Expense, shall be reversed and the corresponding provisionally reduced Revolving Loan Commitments shall be reinstated. The net effect of the foregoing would be that the Revolving Loan Commitments, as reduced to the reflect the Provisional Commitment Reduction, would be adjusted upwards by an amount equal to the amount of the Appraisal Expense. The Availability Reserve was also modified. The Agreement has also been modified to reflect that all references to Sanwa Business Credit Corporation be replaced with Fleet Business Credit Corporation. Judge Case has Ordered that that any party in interest objecting to the entry of a final order on the Motion shall file a written objection no later than June 17, 1999. If no written objection and request for final hearing on the Motion has been timely filed, the Order shall be deemed to be the final order on such date after 4:00 p.m. and shall continue on a final basis and remain in full force and effect and constitute final authority for the extension of the financial accommodations contemplated by this Order and the Second Amendment. If a timely objection is filed, served, and received, a final hearing shall be held on the Motion and objections thereto on June 29, 1999, at 10:00 a.m. COMMERCIAL FINANCIAL: Seeks Approval of Bidding Procedures ---------------------------------------------------------- The debtors, Commercial Financial Services, Inc. and CF/SPC NGU, Inc., seek entry of an order establishing certain buyer protections and bidding procedures for the proposed sale of certain assets of CFS. CFS will seek to sell all of the fixed assets of CFS to Worldwide Asset Management LLC for a cash purchase price of $16.5 million. Purchaser shall also assume liability of CFS for certain employee vacation pay up to an aggregate limit of $1.8 million and assume any liability of CFS to its employees under the WARN Act. The purchaser will also negotiate a new contract with AT&T. The Sale Procedures include a topping fee payable to Purchaser in the amount of $1.5 million. The Sale Procedures also require that any initial competing bid exceed by at least $2 million the cash component of the purchase price proposed to be paid to Purchaser. The Sale Agreement establishes a closing date of on or before July 31, 1999. CROWN PACKAGING: Questions Dual Filing in US and Canada ------------------------------------------------------- Securities Data Publishing, Mergers Acquisitions reports on June 7, 1999 that Marc Gineris of BT.Alex Brown's restructuring group said with respect to Crown Packaging, "We're in the process of negotiating some type of agreement with bondholders and have been for seven or eight months now." Crown has until October 2000-when its operating company's bonds become due-to arrive at a solution. One option being bandied about for Crown is filing Chapter 11 in the U.S., while concurrently filing under the Companies Creditors Arrangement Act in Canada for debtor's protection, Gineris said. Dual filing is a viable choice for Crown since it has operations in Seattle. "That really helps make the case that they're in the U.S., both in operations and {because} many of their markets are U.S. That increases the argument and the merit of filing here," he noted. Crown has not reached a decision on dual filing, but it's likely that is the path it will take, said Ann Ferreira, VP in Alex. Brown's San Francisco restructuring office. Among the largest holders of Crown's debt is White Plains, N.Y.- based Whippoorwill Associates, Inc., the firm, which owns a controlling share of the bonds at the holding company level and some of the operating company debt. EDISON BROS: Taps Brown & James To Handle Litigation ---------------------------------------------------- Edison Brothers requests permission to employ Brown & James nunc pro tunc to March 9, 1999. The Debtors tell Judge Walrath that the attorneys for Brown & James are familiar with the matters being litigated, including several EEOC claims, sexual harassment claims and other employment-related matters, and are well qualified to represent the Debtors as special counsel. The principal attorneys designed to represent the Debtors and their current standard hourly rate are: Charles E. Reis $150 per hour Jerlad M. Alton $150 per hour Kathie A. Bullerdick $110 per hour Debra D. Nye $110 per hour Creighton J. Cohn $110 per hour In addition, the paraprofessionals at Brown & James currently have standard hourly rates of $60 per hour. Brown & James will also seek reimbursement of actual, necessary expenses and other charges incurred. (Edison Brothers Bankruptcy News Issue No. 30; Bankruptcy Creditors' Service Inc.) ELECTRO-CATHETER: Order Authorizes Retention of Counsel ------------------------------------------------------- The US Bankruptcy Court for the District of New Jersey entered an order approving the retention of law firm Ravin, Greenberg & Marks, PA for the debtor, Electro-Catheter Corporation. ERNST HOME CENTER: Approval of Disclosure Statement --------------------------------------------------- The debtors, Ernst Home Center, Inc. and EDC, Inc. report that the Disclosure Statement of the debtors was approved on May 14, 1999. June 25, 1999 is the deadline for submitting written acceptances or rejections of the plan. A hearing to consider confirmation of the plan will be held on July 9, 1999 at 11:00 AM before the Honorable Karen A. Overstreet, US Bankruptcy Court, 1200 Sixth Avenue, Room 427, Seattle, Washington. ERNST HOME CENTER: Disclosure Statement and Plan Summary -------------------------------------------------------- Since late November 1996, Ernst Home Center, Inc. and EDC, Inc., debtors have been liquidating their assets, and the vast majority of Ernst's inventory was liquidated through going out of business sales held between late November 1996 and early February 1997. By February 1997, all of Ernst's inventory had been sold and all of Ernst's stores had been closed. The inventory liquidation grossed approximately $84 million. The debtors estimate that pursuant to the plan non-priority unsecured creditors will be paid between 3.2% and 7.2% of their allowed claim amounts. A summary of the treatment of creditors as proposed in the plan is as follows: Class 1 - Administrative Expenses - Estimated at $1.472 million Class 2 - The claims of Congress - previously paid in full Class 3 - The claims of subordinated lenders - previously paid in full Class 4 - Priority claims Estimated at $345,000 - Class 5 - Class Action Claim - Estimated at $400,000 Class 6 - Secured claims - Estimated At $68,000 Class 7 - Small non-priority unseucred claims - Estimated at $1.7 million - Each allowed claim shall be paid 5% of the allowed claim. Class 8 - Non-priroirty unsecured Claims - Estimated at $88.3 million Class 9 - interests. Cancelled on the Effective Date - no distribution. Classes 2,3,4,5,6,7,8, and 9 are impaired under the plan. The plan provides for the substantive consolidation of Ernst and EDC, Inc. The plan provides for the settlement of a substantial class action lawsuit pending against Ernst. The lawsuit asserts claims against Ernst for "off the clock" work performed by Ernst's employees. There is also a related lawsuit against certain former officers and directors of Ernst. The claims asserted are for a principal amount of $10 million. The settlement will be satisfied by a single lump sum payment of $400,000. As of January 230, 1999, Ernst held cash of approximately $2.5 million. Ernst anticipates it will gross somewhere between $2 million and $8 million in additional cash from completing its liquidation, mostly coming from ongoing preference litigation. FIDELITY BANCORP: Loan Originations Way Up, Improved Results ------------------------------------------------------------ Fidelity Bancorp Inc. reported earnings for the second fiscal quarter ended March 31, 1999 of $994,000, compared with $960,000 for the same quarter a year ago, an increase of 3.6%. Net income for the three months ended March 31, 1999 was $994,000, an increase of $34,000 from the net income of $960,000 for the three months ended March 31, 1998. Total assets at March 31, 1999 were $555.2 million, compared to $513.6 million at September 30, 1998. Loans receivable, net of allowance for loan losses, grew $33.0 million. The company reported record loan originations of $102.7 million which boosted net receivables. Fidelity continues to offer various loan products, and prices them competitively. The company's total loan originations for the six months ended March 31, 1999 increased 78.1% or $45.0 million above the 1998 six month originations of $57.6 million. Deposits remained stable, at $334.9 million at March 31, 1999, up slightly from $330.7 million at September 30, 1998. FHLB advances increased 39.4% from $121.4 million at September 30, 1998 to $169.2 million at March 31, 1999. Additional borrowings were necessary as the result of significant new loan growth. The most recent notification, July, 1998, from the federal banking agencies categorized the company and the bank as well capitalized under the regulatory framework for prompt corrective action. Quantitative measures established by regulation to ensure capital adequacy require the bank to maintain minimum amounts and ratios of tangible equity to tangible assets of 2%, Tier 1 capital (leverage capital) to adjusted total assets of 5%, Tier 1 risk-based capital to risk-weighted assets of 6%, and of total risk-based capital to risk-weighted assets of 10%. Fidelity indicates that there are no conditions or events since that notification that have changed the company's or the bank's categories. FITZGERALDS GAMING: Final Acts Remain In Sale of Nevada Clubs ------------------------------------------------------------- During the first quarter of 1999, Fitzgeralds experienced a 9.6% net revenue growth in comparison with the same period in 1998, in spite of the termination of the Cliff Castle management agreement in June of 1998 and the completion of the settlement agreement with the Turning Stone Casino in September of 1998. Actual revenue was $51,974,427 in the 1999 period as opposed to $47,418,356 in the 1998 period. Notwithstanding a nearly 10 per cent revenue growth in the 1999 period the corporation suffered a net loss, first quarter, of $2,810,619 as opposed to a similar loss of $2,580,158 in the first quarter of 1998. In order to preserve market share in each of its four existing markets, Fitzgeralds continues to increase its promotional and complimentary expenses to meet the challenges of the highly competitive markets, resulting in reduced operating margins, according to the company. A note payable by Fitzgeralds Reno, Inc. to a trust which is secured by Nevada Club assets will be retired upon the sale of Nevada Club which is anticipated to close in the second quarter of 1999. As of April 4, 1999, such note payable had a principal balance of approximately $0.7 million. Since both the Nevada Club and Harolds Club are in process of sales transactions the net cash flow received by the company upon the closing of the Nevada Club and Harolds Club transaction will be approximately $2.0 million. There can be no assurance, however, that Nevada Club will be sold and the Harolds Club settlement will be consummated. On May 31, 1995, FRI sold the closed Harolds Club in Reno to an unrelated publicly-traded company which subsequently conveyed Harolds Club to a company whose assets are now under control of the United States Bankruptcy Court for the Northern District of New York. Under the terms of certain indemnification agreements executed by FRI in connection with the sale of Harolds Club, as of April 4, 1999, FRI is contingently obligated for certain land lease payments to two lessors in the amount of approximately $0.25 million annually plus certain property-related costs, such as taxes and insurance, if said lease payments and costs are not paid by the current owner of Harolds Club. As of April 4, 1999, the current owner of Harolds Club was approximately $1.5 million in arrears in land lease payments and approximately $0.27 million in arrears in property taxes and assessments. On June 3, 1998, the current owner of Harolds Club entered into an asset purchase agreement to convey its fee simple interest in Harolds Club and improvements thereon to an undisclosed purchaser. The same undisclosed purchaser had also entered into an agreement with FRI and NCI to purchase the Nevada Club. In August 1998, FRI and four land lessors also executed an asset purchase agreement to convey their fee simple interests in Harolds Club and the improvements thereon to the undisclosed purchaser. On or about April 6, 1999, the undisclosed purchaser executed the land lessors asset purchase agreement which was modified to, among other things, extend the closing date to May 24, 1999. As of April 20, 1999, FRI and three of the land lessors had executed the land lessors asset purchase agreement. The parties anticipate that the fourth land lessor will have executed the modified land lessors asset purchase agreement on or before May 21, 1999. If the undisclosed purchaser exercises its right to extend the closing date by 30 days, it is anticipated that the sale of Harolds Club and the Nevada Club will close on or before June 25, 1999; however, no assurance can be given that the fourth land lessor will execute the modified land lessors asset purchase agreement or that the transaction will be completed. FRI, four of the land lessors and the current and prior Harolds Club land lessees have executed settlement agreements, pursuant to which FRI has agreed to pay four of the land lessors approximately $1.7 million cash, less the cumulative amount of interim monthly rental payments ($0.028 million per month through December 31, 1998 and $0.011 million per month commencing January 1, 1999), concurrently with the closing of the sale of Harolds Club in exchange for dismissal with prejudice of all claims and cross-claims against FRI arising out of FRI's purchase and subsequent sale of Harolds Club. The settlement agreements expired by their own terms on October 31, 1998 as closing of the Harolds Club sale did not occur by such date. The parties to the settlement agreements, through their counsel, have agreed to extend the expiration date of the settlement agreements to June 25, 1999. Because the assets of the current owner of Harolds Club are under the control of the United States Bankruptcy Court for the Northern District of New York, the Court must approve the asset purchase agreement. An order approving the sale was issued on October 8, 1998. A motion to modify the order to, among other things, extend the closing date, has been filed and a hearing on the motion was set for May 27, 1999. The closing of the sale of Harolds Club is subject to the closing of the sale of Nevada Club and the undisclosed purchaser's acquisition of other parcels of land adjacent to Harolds Club. Although it is currently anticipated that the Harolds Club and related transactions will close in the second quarter of 1999, no assurance can be given that the transactions will be completed. Moreover, in the event that such transactions are consummated, it is likely that the unaffiliated purchaser may utilize the land for gaming facilities that will compete with Fitzgeralds Reno. GARDEN BOTANIKA: Continues Liquidations and Closings ---------------------------------------------------- Garden Botanika Inc., Redmond, Wash., reported on Friday that comparable store sales for May decreased 8 percent from a year earlier for the 149 stores open at least one complete fiscal year, and total sales dropped to $4.5 million from $6.9 million, according to a newswire report. The drop in sales is primarily due to the decrease in the number of stores from 280 to 150. In May, Garden Botanika continued to liquidate and close 90 stores, with the bankruptcy court's authorization, and it received $2.6 million under the terms of a contract with a third-party liquidator. The 90 stores that closed were excluded from the comparable store base and their sales were not included in the total sales figures. On May 27, the court gave the company final approval to borrow on its $7 million credit line with BankBoston Retail Finance, in accordance with its terms. (ABI 07-June-99) GARDEN BOTANIKA: Company Says it Will Emerge By or Before 2001 -------------------------------------------------------------- Garden Botanika is a botanically-based cosmetics company that currently operates 150 primarily mall-based retail stores in 31 states throughout the United States. On April 20, 1999, Garden Botanika filed a voluntary petition for relief under Chapter 11, Title 11 of the United States Code with the United States Bankruptcy Court for the Western District of Washington at Seattle, Washington. As a result of the Chapter 11 case, the company is prohibited from paying, and creditors are prohibited from attempting to collect, claims or debts arising prior to the petition date. The company, as debtor and debtor-in-possession, has continued to manage and operate its business, subject to the supervision and orders of the Bankruptcy Court. The company expects to reorganize under Chapter 11 and propose a reorganization plan that provides for emergence from bankruptcy by or before 2001. Under the Bankruptcy Code, Garden Botanika has the exclusive right to file a reorganization plan through August 18, 1999, and the Bankruptcy Court may grant a request to extend the exclusive period. As always, in cases such as this, there is uncertainty as to whether the company will propose a plan in a timely fashion or that, if requested, the Bankruptcy Court will grant an extension. After expiration of the exclusivity period with any extensions, creditors of the company and other parties-in- interest have the right to propose their own reorganization plans. Although management says it expects to file a reorganization plan that provides the means for satisfying claims and interests in the company, there can be no assurance that a plan will be proposed or that, if proposed, it will be confirmed by the Bankruptcy Court or that, if confirmed, it will be consummated. At this time, it is not possible to predict the outcome of the Chapter 11 case or its effects on the company's business. The company states that a report by its independent accountants has indicated doubt about Garden Botanika's ability to continue as a going concern. In addition to operating its 150-store base, under authority of the Bankruptcy Court, the company closed five stores and engaged the services of a liquidator that has been or is currently in the process of liquidating inventory at 90 other company-leased store locations having leases that the company intends to reject as part of its reorganization efforts. As a debtor-in-possession, Garden Botanika has the right, subject to Bankruptcy Court approval and certain other limitations, to assume or reject real estate leases, employment contracts, personal property leases, service contracts and other executory pre-petition contracts. Garden Botanika offers a broad line of proprietary branded products including color cosmetics, skin care, body care and fragrances. Management believes that Garden Botanika's product line is unique in its use of natural plant oils, botanical extracts and herbal infusions to create highly functional and emotionally appealing products that have developed strong customer loyalty, particularly on the East and West Coasts. Since its founding in 1990 and its initial successes in opening stores in the Pacific Northwest and California, the company developed a recognized brand identity that led to its rapid national expansion. The company believes that its brand identity is based upon high-quality products with botanically based formulations subject to strict ingredient guidelines; its value-oriented pricing; and a high- quality store experience, which the company provides through its store design, customer service and the visual presentation of its products and signage. HIGHWAYMASTER: Settlement Agreements Enhance Revenue Figures ------------------------------------------------------------ Highwaymaster Communications Inc. develops and implements mobile communications solutions, including integrated voice, data and position location services, to meet the needs of its customers. The initial application for the company's wireless enhanced services has been developed for, and is marketed and sold to, companies which operate in the long-haul trucking market. The company provides long- haul trucking companies with a comprehensive package of mobile communications and management control services at a fixed rate per minute, thereby enabling its trucking customers to effectively monitor the operations and improve the performance of their fleets. During the third quarter of 1998, the company began delivery of mobile communication units for use in a service vehicle application. The company is currently developing additional applications for its network to expand the range of its commercial dispatch and tracking services to broader lines of business. During the three months ended March 31, 1999 the company recorded the benefit of credits due from cellular carriers related to 1997 and 1998 based on a settlement agreement reached with GTE Wireless, Inc. and GTE Telecommunications Incorporated on May 3, 1999. These credits had not been previously recognized on the company's financial records because of significant uncertainty as to their ultimate collectibility. The effect of these credits was to increase income by $3,724,000. Also, during the three months ended March 31, 1999, the company recorded the benefit from the settlement of the litigation with AT&T Corp. Taking these items into consideration revenue for the first quarter 1999 was reported by the company to be $17,081 with a net income of $390. In 1998, first quarter, revenue was $15,723 but the company suffered a loss of $11,589. Highwaymaster says, however, that the company's capital resources may be insufficient to fund its operating needs, capital expenditures and debt service requirements in the long-term. The company believes that, in order to address its long-term capital requirements, it will need to take steps to increase the installed base of mobile units in service and improve the efficiency of its operations, so as to reduce or eliminate its operating losses, or obtain additional sources of debt or equity financing. The company's ability to obtain additional debt financing is materially restricted under the terms of the indenture governing the Senior notes. There can be no assurance that Highwaymaster would be able to obtain additional debt and equity financing on satisfactory terms, if at all. HOMEPLACE: Court Confirms Plan ------------------------------ HomePlace Stores Inc., Cleveland, announced that the bankruptcy court has confirmed its First Amended Joint Plan of Reorganization, enabling the company to emerge from bankruptcy on or about June 14, according to a newswire report. As previously announced, the company will merge with The Waccamaw Corp., but the HomePlace name will be used. HomePlace is a national home fashion chain of 75 stores. The new entity will have 118 stores in 27 states. HomePlace's unsecured creditors will receive, in the aggregate, $25 million in cash and 42.8 percent of the new common stock of the reorganized company. Preferred shareholders will receive 1 percent of the new common stock of the reorganized company and warrants to acquire additional shares of the new stock. Waccamaw's shareholders will own the remaining 56.2 percent of the new common stock. HomePlace and its affiliates filed chapter 11 in January 1998. IONICA PLC: Seeks Approval of Cross Border Protocol --------------------------------------------------- The debtor, Ionica Plc is a provider of fixed telephony services for residential and small business customers, using a fixed radio access network. In order to harmonize the administration proceedings in the UK, and the chapter 11 proceedings in the US and to avoid litigation over conflicts between the laws of the two countries, the debtor proposes a certain Protocol. The Protocol specifically addresses which of the Joint Administrators will conduct the sale of the debtor's assets, and which country's laws shall apply to such sales; the necessary approvals for the receipt of payment by the Joint Administrators and/or Cadwalader, Wickersham & Taft, or the advancement of funds to the debtor by third parties for such payment and the form of the operating reports required to be submitted in the UK to the UK Creditors' Committee and in the US to the United States Trustee for the Southern District of New York. The Protocol provides that PricewaterhouseCoopers, as the Administrator, will be responsible for the orderly sale of the debtor's assets wherever they may be located. LAURA ASHLEY: Shareholders Back Plan ------------------------------------ The British retailer, which made its name selling English country fashions and furnishings, recently won a crucial reprieve when bankers agreed to let it continue borrowing so long as it sold off its unprofitable chain of U.S. stores. But while shareholders approved the sale Thursday, enabling Laura Ashley to write off $34.4 million in debt, the retail chain must still try to recover from years of losses and chaotic management, including seven chief executives in 10 years. Its survival will depend on the company's finding a fashion direction that grabs shoppers the way Laura Ashley clothes did more than a decade ago. After rallying in 1996, Laura Ashley's stock price began a long slide from a peak of 210 pence, or $1.30, to its current level of 13.5 pence, or 21.8 cents. Lately, the chain has fought to stay in business by cutting costs and trying to broaden its appeal. Laura Ashley reported an annual pretax loss of 16.7 million pounds, or $26.7 million, for the year ending January 1999, compared to a 25.5 million pound, or $40.8 million, loss the year before. Almost all of the latest loss is attributable to its U.S. operations. Laura Ashley began selling in the United States during a wave of aggressive expansion in the 1980s and early 1990s. But its business here has suffered for years, and the company is now selling 106 North American stores to a group supported by Malayan United Industries, the Malaysian firm that last year injected 44 million pounds or $70 million into Laura Ashley in exchange for a 40 percent stake. Company secretary Stephen Cox has said that despite a lengthy search for a buyer, the management buyout team was the only one that made a formal offer. The sale, announced April 28, leaves Laura Ashley with some 300 stores in Britain and continental Europe and an additional 200 franchised and licensed stores in other countries. Its cash flow should benefit further from shareholders' approval on Thursday of a 25.9 million pound, or $41.4 million, rights issue, which lets them buy new stock at a discounted price. Money from the rights issue will allow the company to pay back its banks, cover the costs of selling its North American business and finance its remaining operations, according to Kwan Cheong Ng, who earlier this year became Laura Ashley's latest chief executive. But even if it succeeds in shoring up its finances, Laura Ashley still must find a way to make its goods attractive to a new generation. LOEWEN GROUP: Prepaid Plans are Safe ------------------------------------ The Loewen Group Inc., which ran up huge debts in expanding its funeral business in the United States, yesterday sought Bankruptcy Court protection from creditors for itself and about 870 of its U.S. subsidiaries. The firm stressed that all of its prepaid funeral obligations would be met and all funds from such programs are protected under government regulations. Loewen owns Desert Rose Cremation & Burial in Tucson and last year signed a 25-year management agreement to run the Catholic cemeteries here, Holy Hope Cemetery and Our Lady of the Desert. No one at the Catholic Diocese of Tucson was available for comment late yesterday. Although based in Vancouver, British Columbia, the company derives 90 percent of its revenue from U.S. operations. The company operates in the United States under the name Loewen Group International Inc. Loewen's United Kingdom subsidiaries, which generate less than 1 percent of its revenues, were excluded from the filings. John S. Lacey, the chairman of Loewen, said the company will honor all of its outstanding contracts for prepaid funeral services at 1,100 funeral homes and 400 cemeteries in the United States and Canada. "Our clients should . . . be assured that monies held in trust accounts for pre-need contracts are secure and protected by state and provincial regulations," Lacey said in a statement. "It is the company's intent to continue operations without interruption," Lacey said. Loewen said its American subsidiaries have a commitment of $200 million from First Union National Bank to cover trade and employee obligations and other cash needs during the court-supervised attempt to restructure its debt. It petitioned the U.S. court yesterday to receive $23 million of those funds immediately. Loewen said its Canadian operations "have sufficient liquidity to fund daily operations." Loewen has long been struggling to make payments on more than $2 billion of debt that it took on to finance aggressive acquisition of cemetery space in the United States. Yesterday's action came as a $17 million interest payment came due. (Tucson Citizen-06/02/99) LOEWEN GROUP: Taps Jones Day as Lead Counsel -------------------------------------------- The Debtors have sought and obtained authority to employ the international law firm of Jones, Day, Reavis & Pogue as their lead bankruptcy counsel to prosecute their chapter 11 cases before the U.S. Bankruptcy Court in Wilmington. Specifically, Jones Day will: (a) advise the Debtors of their rights, powers and duties as debtors and debtors in possession continuing to operate and manage their businesses and properties under chapter 11 of the Bankruptcy Code; (b) prepare on behalf of the Debtors all necessary and appropriate applications, motions, draft orders, other pleadings, notices, schedules and other documents, and review all financial and other reports to be filed in these chapter 11 cases; (c) advise the Debtors concerning, and prepare responses to, applications, motions, other pleadings, notices and other papers that may be filed and served in these chapter 11 cases; (d) advise the Debtors with respect to, and assist in the negotiation and documentation of, financing agreements, debt and cash collateral orders and related transactions; (e) review the nature and validity of any liens asserted against the Debtors' property and advise the Debtors concerning the enforceability of such liens; (f) advise the Debtors regarding their ability to initiate actions to collect and recover property for the benefit of their estates; (g) counsel the Debtors in connection with the formulation, negotiation and promulgation of a plan or plans of reorganization and related documents; (h) advise and assist the Debtors in connection with any potential property dispositions; (i) advise the Debtors concerning executory contract and unexpired lease assumptions, assignments and rejections and lease restructurings and recharacterizations; (j) assist the Debtors in reviewing, estimating and resolving claims asserted against the Debtors' estates; (k) commence and conduct any and all litigation necessary or appropriate to assert rights held by the Debtors, protect assets of the Debtors' chapter 11 estates or otherwise further the goal of completing the Debtors' successful reorganization; (l) provide general corporate, litigation and other nonbankruptcy services for the Debtors to the extent that Jones Day provided such services prior to the Petition Date or as requested by the Debtors; and (m) perform all other necessary or appropriate legal services in connection with these chapter 11 cases for or on behalf of the Debtors. Jones Day will charge for its legal services on an hourly basis in accordance with its ordinary and customary hourly rates which range from $380/hour for a partner to $135/hour for an associate. Jones Day discloses that, prior to the Petition Date, on or about May 18, 1999, Loewen paid a $1,775,000 Retainer for services rendered or to be rendered. On or about May 28, 1999, Jones Day applied $1,725,000 of the Retainer as payment for fees and expenses incurred or expected to be incurred for the period through and including May 31, 1999. Accordingly, as of the Petition Date, approximately $50,000 of the Retainer remained unapplied. Further, Jones Day discloses that it received $12,125,611 from the Debtors and CNA Insurance during the year immediately preceding the Petition Date on account of fees and expenses incurred by Jones Day on matters relating to the Debtors. (Loewen Bankruptcy News, Issue No. 2, Bankruptcy Creditors' Service, Inc., 609/392-0900) LONG JOHN SILVER: Interim Order ------------------------------- The US Bankruptcy Court for the District of Delaware entered an order authorizing extension of secured postpetition financing on a super priority basis, use of cash collateral and grant of adequate protection and scheduling a final hearing. The debtors, Long John Silver's Restaurants, Inc. et al. were granted authority to continue to obtain secured postpetition financing and for the Guarantors to continue to guarantee the payment of such obligations, up to an aggregate principal amount not to exceed $40 million from The Chase Manhattan Bank, as agent for lenders. MCA FINANCIAL: Assets Auctioned ------------------------------- Chase Bank of Texas, which represents a group of six banks, was the highest bidder at an auction held last week to sell 290 mortgages, notes and certain underlying property rights that were previously under the control of MCA Financial Corp., according to a newswire report. B.N. Bahadur, conservator of MCA Financial Corp. and CEO of BBK Ltd., a turnaround company, said the MCA estate will be relieved of $13.8 million of debt, as a result of the auction. (ABI 07-June- 99) MEDPARTNERS: Deadline Extended for Agreement -------------------------------------------- MedPartners Inc., Birmingham, Ala., said that a California state court has extended the deadline from June 3 to June 9 for it and the California Department of Corporations to reach a definitive settlement on the disposition of MedPartners' physician management operations in the state, which is operating under chapter 11 protection, The Wall Street Journal reported. On May 11 an interim agreement was announced, and the court must approve a definitive settlement. MedPartners has maintained that the California regulators' actions were unnecessary and improper when they seized the subsidiary in March. (ABI 07-June-99) ONEITA INDUSTRIES: Seeks Extension Of Time To Assume/Reject Leases ------------------------------------------------------------------ The debtor, Oneita Industries, Inc. seeks court approval to extend the debtor's time to assume or reject lease of nonresidential real property at its Lawrenceville, Georgia Distribution Center through and including August 15, 1999. The Distribution Center is leased through November 30, 1999 at an annual rent of $966,000. The debtor requires the use of the Distribution Center for at least the next 90 days so that Consolidated Auctioneers & Liquidators, Inc. may sell from the Distribution Center the activewear inventory it purchased pursuant to the consolidated bulk sale in May, 1999. PARAGON TRADE: Seeks Eighth Extension of Exclusivity ---------------------------------------------------- The debtor, Paragon Trade Brands, Inc. seeks a thirty-day extension of its exclusive periods to file a plan of reorganization and solicit acceptances thereto. The debtor seeks an extension to July 19, 1999 for filing its plan, and a further extension to and including September 19, 1999 to solicit acceptances to the plan. The debtor says that there is good cause to extend its exclusive periods. The requested extensions will allow the parties to focus their efforts on obtaining approval of the two settlements with P&G and K-C and to achieve as much consensus as is practicable on the terms of a plan of reorganization that incorporates the terms of those settlements without the treat and distraction of competing plans. The requested extensions will also allow Paragon to spearhead plan discussion and foster a consensual plan process through which the parties hopefully can agree on a fair and equitable allocation of the substantial value that is available in this case. PHILIP SERVICES: To File Prepack in US and Canada ------------------------------------------------- Securities Data Publishing, Mergers Acquisitions reports on June 7, 1999 that Philip Services Corp., based in Hamilton, Ontario, will file its prepack in both Canada and the U.S. this month, according to a Philip spokeswoman. Philip, with more than U.S.$1 billion in long- term debt, is a waste management company. The debt will be restructured into $250 million in senior secured notes and $100 million in payment-in-kind notes, with the balance converted to equity. PHP HEALTHCARE: Seeks Order Establishing Bidding Procedures ----------------------------------------------------------- PHP owns 100% of the stock of Health Cost Consultants, Inc. ("HCC"). HCC, through various licenses and contracts, provides health care information and consultation to customers. PHP has been unable to obtain an adequate price for the sale of the stock of HCC; however, PHP has entered into negotiations with a party who has offered to pay $2.7 million for the purchase of the assets of the HCC, provided that such assets can be sold promptly with the approval of the Bankruptcy Court in this PHP bankruptcy proceeding. The debtor believes that such a transaction would materially benefit the debtor and the debtor's estate. The debtor, PHP Healthcare Corporation seeks a court order establishing bidding procedures relating to the sale of the assets of HCC, and approving the form and manner of notice thereof. The debtor also seeks authorization to enter into a binding agreement to pay a $100,000 Break-Up Fee with a party who enters into a contract to purchase the HCC Assets. The debtor seeks approval of a minimum initial cash bid for the HCC assets providing consideration of at least $2.5 million in cash which will be $150,000 over the offer of the "stalking horse" bidder. PHP believes that the Bidding Procedures and the Break-Up Fee are the best way to maximize the value of the Contracts. PITTSBURGH PENGUINS: Judge Gives "Pep Talk" ------------------------------------------- The Pittsburgh Post-Gazette reports on June 5, 1999 that U.S. Bankruptcy Court Judge Bernard Markovitz said an amicable compromise would be much better for everyone involved than the franchise going belly up. "I'll miss the team, but I'll go on. You folks will have missed an opportunity to save an asset of the community," said Markovitz, standing behind the bench in his black robe. "It will be our failing." The judge's off-the-cuff remarks came at the conclusion of a day-long hearing yesterday during which he voided the Penguins' lease with SMG, its landlord. He was leaving the room when he addressed Eric Schaffer, an attorney representing Fox Sports Net, but it was clear that he was also directing his remarks to the lawyers representing the Penguins, the National Hockey League, Mario Lemieux, Harold Baldwin, major creditors, bondholders, etc. Markovitz's remarks were his most expansive since the Penguins came into his court in October seeking protection under federal bankruptcy laws. In a firm, even-handed tone, he gave some encouragement to hockey fans clinging to the dying embers of hope that the Penguins would survive. The Penguins need to play in the Civic Arena and SMG needs the Penguins to play there, so both parties have powerful economic incentives to make up, he said. To the Fox Sports Net lawyer, the judge said: "You need a hockey game on TV. You surely don't want to fill it up with mud wrestling." And to the NHL the judge said it would be a travesty to either move the team or sell off its assets. "The last thing the NHL wants is to have this franchise terminated, and we sell off this hockey team's pots and pans. That is not going to be worth enough to pay everybody in full," Markovitz said. As it now stands, the parties have until June 24 - the Stanley Cup will have been hoisted by then - to work out their differences. And Markovitz said fans would have to endure the three-week wait. "The fans appear to be loyal to the Penguins. Despite the fact we've cluttered the media with this legal hocus- pocus, the fans come out to watch the athletes. If they haven't been devastated up till now, I imagine the community can wait to the end of the month to see if these great athletes play in Pittsburgh or someplace else," Markovitz said. The no-nonsense judge has a wry humor that spices up proceedings that are as serious as they are eye-glazingly technical. The judge suggested that if he forced the lawyers to drink more coffee and locked the restrooms, "We'll get it done quicker." Markovitz's talk seemed to have sunk in as the lawyers dispersed. "It was a very clear message for us to get to work," said Gregory Cribbs, chief legal counsel for the Penguins. PROCTER & GAMBLE: Cutting Thousands of Jobs, Closing Offices ------------------------------------------------------------ Procter & Gamble Co. is expected to announce next week that it is cutting thousands of jobs, closing plants and offices worldwide and taking a charge of as much as $1.5 billion, in its second major reorganization this decade.(Arizona Republic; 06/04/99) READING CHINA: Seeks To Pay Severance and Stay Bonuses ------------------------------------------------------ The debtors, Reading China and Glass, Inc. RCGTH, Inc., Calvert Importers and Distributors, Inc. and RCGTM, Inc. seek approval to pay severance and stay bonuses to certain continuing employees. The debtors are in the process of conducting an orderly liquidation of their assets. The debtors' proposed Retention Program is critical to maximizing value from the debtors' estates. Debtors estimate that the total cost of the Retention program will be approximately $140,000. Absent implementation of the program, the employees have little or no incentive to stay with the debtors, and the debtors say that they cannot afford to lose their key employees at this late stage of the Chapter 11 cases. RENAISSANCE COSMETICS: Files Chapter 11 Bankruptcy -------------------------------------------------- Fragrancemaker Renaissance Cosmetics and eight affiliates filed for Chapter 11 bankruptcy protection from its creditors after reporting sales losses and mounting debt. In documents filed late Thursday in U.S. Bankruptcy Court, the company reported more than $50 million in assets and more than $100 million in debts. The following affiliates also filed for bankruptcy: Cosmar Corp.; RCI China Inc.; Dana Perfumes Corp.; Great American Cosmetics Inc.; Houbigant (1995) Ltd.; MEM Co. Inc.; Renaissance International Export Inc.; and Tinkerbell Inc. (Arizona Republic; 06/04/99) RUSSELL CAVE: Committee Objects To Extension -------------------------------------------- The official Committee of Unsecured Creditors of Russell Cave Company, Inc. f/k/a The J. Peterman Company objects to the debtor's motion for an extension of time to file a plan of liquidation and to solicit acceptances to the plan and a motion of the debtor for an order fixing time for filing proofs of claim and interests. The Committee says that an extension of the debtor's exclusive periods for filing a plan and soliciting acceptances is neither warranted nor appropriate. The Committee says that the debtor is taking a much longer time than necessary for its wind down activities, and that there has been an unexpected increase tin the debtor's monthly wind down expenses. The Committee also complains that it has not been apprised of complete financial information of the company. The Committee is concerned that over four months into this case, and no monthly US Trustee's reports have been filed by the debtor, and financial statements for March and April operations have not yet been completed. The Committee states that the debtor has failed to demonstrate "cause" for its requested extensions of exclusivity. If the pace of the wind down activities does not improve and the costs continue to substantially exceed projections, the Committee asserts that it should be permitted to file its own plan and move this case to a prompt conclusion. SOUTHERN PACIFIC: Renewal of Motion For Examiner ------------------------------------------------ BOMAC Capital Mortgage, Inc. seeks a hearing on the motion for the appointment of an Examiner in this case. BOMAC is presently engaged in litigation with the DIP over the ownership of residual interests in certain mortgage loans originated by BOMAC. BOMAC is requesting an order enjoining any bulk sale of the residuals by the DIP until such time as a proper examination of the DIP's proposed disposition of the residuals has occurred. BOMAC argues that it is time for an objective independent examiner to investigate the hold strategy so that a fair comparison is made between the all-out efforts of the DIP and Pentalpha to sell the residuals and the possibility of employing the hold strategy. BOMAC says, "After all, up to a $2 million break-up fee pays for one heck of a lot of proper servicing, as does another $1.15 million in cash bonuses to Mr. Padrick, Mr. Hedemark, Mr. Breedlove and Ms. Oliver, not to mention the $45,000 per month paid to Pentalpha and the 1.63% to 3% Transaction Fee that Pentalpha will earn at closing. With respect to the settlement agreement entered between the DIP and Bear Stearns, BOMAC says that an Examiner should report on the current status of the indebtedness to Bear Stearns that is secured by the DIP's residual interests and the residual interests in which BOMAC claims ownership. Included in that analysis would be a report on whether the DIP has collected pre-payment penalties and whether collected funds have been used to reduce the DIP's obligation to Bear Stearns. If the Examiner reports that there is a viable hold strategy, the next critical question is whether there is enough time remaining on the 18 month drop-dead agreement that Bear Stearns entered with the DIP for repayment of the DIP's obligation to Bear Stearns. The Examiner should also report on the conditions in the Bear Stearns agreement requiring the DIP to move the servicing of the loans from the DIP's Santa Rosa facility and the impact, if any that condition has had on the DIP's decision to sell the residuals. STEEL HEDDLE: Net Sales Down 3.8%, Net Loss Vs. Gain Last Year -------------------------------------------------------------- Steel Heddle Group Inc. operates within two segments, the Textile Products group and the Metal Products group. Textile Products manufactures textile loom accessories including heddles, dropwires, harness frames and reeds, all of which are used to hold or guide individual yarns during the weaving process. Metal Products processes and sells rolled products. Metal Product's wire rolling operation provides material used by Textile Products and a variety of other industries, including electronics, automotive and solar power. Net sales decreased $737 for the three months ended April 3, 1999 to a level of $18,529 as compared to the three months ended April 4, 1998 when net sales were $19,266. The company incurred a net loss of $2,182 for the three months ended April 3, 1999 compared to net income of $2,515 for the three months ended April 4, 1998. TRANSTEXAS GAS: Seeks Authority To Pay Pre-Petition Royalties -------------------------------------------------------------- The debtors, TransTexas Gas corporation, et al. seek authority to pay certain pre-petition royalties arising under certain oil and gas leases. If unpaid, it will result in the termination of certain leases held by TransTexas that are property of the estate. The leases are valuable property without which the debtors' ability to reorganize and provide a distribution to their creditors will be jeopardized. The debtors say that the amount of the royalties due and owing is relatively small in comparison with the significant value of the leases. The end of the cure period for payment of the royalties is June 18, 1999. The royalty payments total $2,145,174. UNITED COMPANIES: Seeks Extension of Exclusivity ------------------------------------------------ The debtors, United Companies Financial Corporation, et al., seek an extension of the exclusive periods during which the debtors may file a plan of reorganization and solicit acceptances thereto. A hearing will be held on June 16, 1999 at 9:30 AM. The debtors request entry of an order extending the exclusive periods for six month, to and including January 5, 2000 and March 6, 2000 respectively. The debtors say that the request is realistic in view of the size and complexity of the Chapter 11 cases as well as the nature of the debtors' business operations and assets and the necessity to afford the debtors a reasonable opportunity to restructure their business operations, determine the best strategy to maximize the value of their assets and propose a plan of reorganization. The debtors have spent a long time negotiating and finalizing the terms of their DIP Credit Facility and DIP Purchase Facility. They have spent time evaluating their real property interests and have reject 125 leases and assumed and assigned approximately 126 leases. The debtors have attended meetings with the Creditors' Committee and they are preparing their schedules of assets and liability. This extension will, according to the debtors, provide them an adequate opportunity to develop a long-range business plan. UNITED COMPANIES: Seeks Time To File Financial Statements --------------------------------------------------------- The debtors, United Companies Financial Corporation, et al., is asking the court to extend the filing deadline to June 16, 1999 for Statements of Financial Affairs and Schedules of Assets, Liabilities, Executory Contracts and Unexpired Leases. At the last minute, the debtors were advised by their auditors of certain adjustment issues that may, depending on their resolution, change the year-end numbers, and thus the financial information contained in the Statement s and Schedules. Therefore, the debtors determined not to file the Statements and Schedules on the previous due date, June 2, 1999 and they now seek this extension with consent of the Untied states Trustee and the stautory committee of unsecured creditors. UNITED HEALTHCARE: Annual Election of Directors Under Consideration --------------------------------------------------------------- United Healthcare Corp. experienced the same net loss in the first three months of 1999 as it did in the same period 1998, namely, $132,000. January through March 1998 saw revenues of $4,115 million whereas the same three months in 1999 yielded revenues of $4,809 million. The company is planning to divest itself of certain business operations and is listing its managed workers' compensation business, and medical and behavioral health provider clinics as targeted. Markets where it plans to curtail or make changes to its operating presence include its small group health insurance business and three health plan markets that are in non-strategic locations. At the company's annual meeting of shareholders held on May 12, 1999 the shareholders voted on three items: the election of four directors, a shareholder proposal requesting that the Board of Directors take the necessary steps to declassify the Board of Directors, and the ratification of the appointment of Arthur Andersen LLP as independent public accountants. The four directors elected at the annual meeting were: Thomas H. Kean, Robert L. Ryan, William G. Spears and Gail R. Wilensky. A shareholder proposal requesting that the Board of Directors take the necessary steps to declassify the Board of Directors so that all directors are elected annually received approval. In order to declassify the Board of Directors, the Board of Directors must first approve and then submit to the shareholders for their approval an amendment to the company's Articles of Incorporation. The Board of Directors will consider the proposal to declassify the Board of Directors at its upcoming meetings, and if it determines that declassifying the Board of Directors is in the best interest of the company and its shareholders, it will submit the matter to a vote of the shareholders at the next annual meeting of shareholders. The appointment of Arthur Andersen LLP as independent public accountants for the year ending December 31, 1999 was ratified. VENCOR: Further Interim Arrangements With Ventas ------------------------------------------------ Vencor, Inc. (NYSE: VC) announced that it and Ventas, Inc. (NYSE: VTR) have entered into further interim arrangements pursuant to which Vencor has agreed to make the May 1999 rental payments on various specified dates during June. Vencor and Ventas also have extended their existing standstill and tolling agreements. As extended, Ventas cannot exercise any remedy under the master leases through July 6, 1999 (or five days following any failure by Vencor to make any payment of May rent as rescheduled pursuant to the agreement) and neither party can bring any action against the other through July 6, 1999 unless Vencor fails to make such rescheduled payments. Vencor will have until July 12, 1999 to cure any default related to the non-payment of the June rent. Edward L. Kuntz, Chairman and Chief Executive Officer of Vencor, stated: "Negotiations are continuing on an agreement for a permanent restructuring of Vencor's financial obligations and a sustainable capital structure. Any such agreement is likely to result in existing Vencor stock having little if any value." Vencor is a long-term healthcare provider operating nursing centers, hospitals and contract ancillary services in 46 states. WIRELESS ONE: Seeks Order Extending Exclusivity ----------------------------------------------- The debtor, Wireless One, Inc. seeks an order extending the exclusive period during which the debtor may file and solicit acceptances of a plan of reorganization. A hearing on the motion will be held before the Honorable Peter J. Walsh at the Bankruptcy Court, 824 North Market Street, Wilmington, Delaware 19801, June 17, 1999 at 4:00 PM. WORLDWIDE DIRECT: Bar Date Set For July 16 ------------------------------------------ The U.S. Bankruptcy Court for the District of Delaware entered an order establishing July 16, 1999 at 4:00 PM Eastern Daylight Time as the last date and time for the filing of proofs of claim and interest against SmarTalk TeleServices, Inc. and its debtor subsidiaries. ZENITH ELECTRONICS: First Qtr. Losses & April Brought More Problems ------------------------------------------------------------------- Zenith Electronics Corporation's core business is the development, manufacture and distribution of a broad range of products for the delivery of video entertainment and is composed of two major product areas--Consumer Electronics (which includes color picture tube operations) and Network Systems (which includes the design and manufacture of digital and analog set-top boxes along with data modems sold primarily to cable and satellite television operators). Sustaining a loss of $25.1 million on sales of $150.6 million in the first quarter of 1999 Zenith Electronics continues the negative results demonstrated in the first quarter of 1998 with a loss of $37.8 million on sales of $220.7 million. As reported in an earlier edition of this Reporter on April 16, 1999, LG Electronics Inc. informed Zenith Electronics that it had received a demand for repayment under LGE's guarantee of the company's $30.0 million demand loan note payable to Credit Agricole. LGE further informed the company that on April 20, 1999, it had made payment in full against its guarantee under such demand. Such payment by LGE gives rise to a claim by LGE against the company under their reimbursement agreement dated as of November 3, 1997. Effective April 19, 1999, the company entered into a second amendment and waiver to its amended and restated credit agreement dated as of June 29, 1998, among the company, the lenders, Citibank, N. A. as issuing bank and Citicorp North America, Inc. as agent. The terms of such amendment extend the maturity date of the facility to the earlier of the bankruptcy filing by the company or August 31, 1999. Also, effective as of April 19, 1999, the company and LGE amended the LGE demand loan facility to provide that no demand for repayment could be made under the facility, absent a default, prior to August 31, 1999. On April 29, 1999, the company was informed by LGE that on April 28, 1999, LGE had acquired 26,095,200 shares of common stock of the company along with the associated common stock purchase rights from its affiliate, LG Semicon Co., Ltd. The company was informed that the aggregate purchase price for such shares was 10 Korean Won (approximately US$0.01). As a result of this transfer, LGE owns approximately 54.2 percent of the outstanding common stock of the company, excluding vested but unexercised options. In April 1999, the company sold substantially all of the assets located at its Cd. Juarez, Mexico facility to subsidiaries of Kimball International, Inc. for approximately $23.8 million less escrowed amounts. On March 31, 1999, the company had entered into a commitment letter with Citicorp North America, Inc. pursuant to which Citicorp North America, Inc. agreed to provide up to $150.0 million of debtor-in- possession financing during the pendency of the company's bankruptcy proceeding and agreed to provide a new three-year $150.0 million credit facility following completion of the company's bankruptcy proceeding, subject in each case to borrowing base restrictions. The new facilities will be secured by certain of the company's assets, including inventory, receivables, fixed assets and intellectual property, and will be subject to other terms and conditions. The commitment is subject to the completion of definitive documentation and other conditions and provides for interest on borrowings based on specified margins above LIBOR or the prime rate. Meetings, Conferences and Seminars ---------------------------------- June 17-19, 1999 AMERICAN LAW INSTITUTE - AMERICAN BAR ASSOCIATION COMMITTEE ON CONTINUING PROFESSIONAL EDUCATION Fundamentals of Bankruptcy Law Conference Crowne Plaza Hotel, Seattle, Washington Contact: 1-800-CLE-NEWS July 1-4, 1999 NORTON INSTITUTES ON BANKRUPTCY LAW Western Mountains Bankruptcy Law Institute Jackson Lake Lodge, Jackson Hole, Wyoming Contact: 1-770-535-7722 July 10-15, 1999 COMMERCIAL LAW LEAGUE OF AMERICA 105th Annual Convention Chateau Mont Tremblant, Mont Tremblant, Quebec Contact: 1-312-781-2000 or clla@clla.org July 15-18, 1999 AMERICAN BANRKUTPCY INSTITUTE Northeast Bankruptcy Conference Mount Washington Hotel & Resort Bretton Woods, New Hampshire Contact: 1-703-739-0800 August 4-7, 1999 AMERICAN BANRKUTPCY INSTITUTE Southeast Bankruptcy Workshop The Ritz-Carlton, Amelia Island, Florida Contact: 1-703-739-0800 August 26-28, 1999 AMERICAN LAW INSTITUTE - AMERICAN BAR ASSOCIATION COMMITTEE ON CONTINUING PROFESSIONAL EDUCATION Real Estate Defaults, Workouts and Reorganizations San Francisco, California Contact: 1-800-CLE-NEWS August 29-September 1, 1999 NATIONAL ASSOCIATION OF BANKRUPTCY TRUSTEES 1999 Convention Grove Park Inn, Asheville, North Carolina Contact: 1-803-252-5646 or info@nabt.com September 16-18, 1999 AMERICAN BANRKUTPCY INSTITUTE Southwest Bankruptcy Conference The Hotel Loretto, Santa Fe, New Mexico Contact: 1-703-739-0800 September 27-28, 1999 RENAISSANCE AMERICAN CONFERENCES & BEARD GROUP, INC. Conference on Corporate Reorganizations Regal Knickerbocker Hotel, Chicago, Illinois Contact: 1-903-592-5169 or ram@ballistic.com October 6-9, 1999 NATIONAL CONFERENCE OF BANKRUPTCY JUDGES 73rd Annual Meeting San Francisco Marriott, San Francisco, California Contact: 1-803-957-6225 October 22-26, 1999 TURNAROUND MANAGEMENT ASSOCIATION 1999 Annual Conference The Fairmont--Atop Nob Hill, San Francisco, CA Contact: 1-312-822-9700 or ljfialkoff@turnaround.org November 29-30, 1999 RENAISSANCE AMERICAN CONFERENCES & BEARD GROUP, INC. Distressed Investing '99 The Plaza Hotel, New York, New York Contact: 1-903-592-5169 or ram@ballistic.com December 2-4, 1999 AMERICAN BANRKUTPCY INSTITUTE Winter Leadership Conference La Quinta Resort & Club, La Quinta, California Contact: 1-703-739-0800 ********** The Meetings, Conferences and Seminars column appears in the TCR each Tuesday. Submissions via e-mail to conferences@bankrupt.com are encouraged. Bond pricing, appearing in each Friday edition of the TCR, is provided by DLS Capital Partners, Dallas, Texas. ********** S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter is a daily newsletter, co- published by Bankruptcy Creditors' Service, Inc., Princeton, NJ, and Beard Group, Inc., Washington, DC. Debra Brennan, Yvonne L. Metzler and Lexy Mueller, Editors. Copyright 1999. All rights reserved. ISSN 1520-9474. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR subscription rate is $575 for six months delivered via e-mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are $25 each. 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